- The fate of the eurozone economy depends on oil prices.
- Japan warns of monetary interventions.
It is poised to mark its best two-week rally since the US presidential election in November 2024. Rising oil prices to their highest levels since August 2022, increasing investor doubts about at least one act of monetary easing by the Federal Reserve in 2026, and the US economy's greater isolation from developments in the Middle East compared to other regions are driving the USD index higher.
According to estimates by the German IFO Institute, even with an imminent end to the war in Iran and falling oil prices, inflation in Germany will accelerate from the previously expected 2% to 2.4% by the end of 2026. The continuation of the armed conflict with black gold remaining at current levels will push consumer prices up to 3% and slow GDP growth from 1.2% to 0.6%.
The ECB and the EU consider it unlikely that the energy crisis in Europe will be repeated. Gas prices are far from those seen in 2022. However, if the closure of the Strait of Hormuz extends until the fall, when the cold weather sets in, a shock scenario in which the EURUSD falls below parity cannot be ruled out.
Oil supply problems are causing oil storage tanks to overflow and reduced production across the Middle East. Furthermore, it will not be easy to restart drilling rigs that have been stopped. Tehran's control over the Strait of Hormuz is driving up prices and putting unexpected pressure on Trump.
Rising oil prices have caused a resumption of the bullish trend in . The yen, which relies on energy imports, continues to weaken, prompting verbal interventions from the Japanese government. Finance Minister Satsuki Katayama stated that the authorities are willing to take all necessary measures regarding currency. However, he did not specify any specific level. He also did not address whether intervention in the Forex market would be effective if the main reason for the weakening of the yen is the rally in Brent.
He FxPro Analyst team
